Courts force Revenue to repay #20K tax demand

Inland Revenue investigators were branded ‘heavy-handed and wholly unreasonable’ by the Special Commissioners for making an incorrect #20,000 tax demand on a restaurant-owning couple.

In a landmark decision, commissioners quashed the Revenue’s claims and ordered it to pay a taxpayer’s costs. Husband and wife team Trevor and Vivienne Scott beat off the Revenue’s additional tax demand, winning payment of at least #10,500 legal costs in the process.

After an investigation into the books of the Scotts’ Southend restaurant, Farthings Steak House, the Revenue claimed extra tax was payable on reassessed profits of #70,000 between November 1993 and December 1995.

Investigators targeted the Scotts on the grounds that the 50% gross profit on sales shown in their accounts was considerably less than the Revenue expected for a restaurant in the area.

But special commissioner Thomas Everett uncovered a ‘vindictive’ campaign against the Scotts and their accountant Alan Howard of local two-partner practice Howard and Stapleton. Southend district tax inspector Michael Cuthbert pursued the case after Howard complained to the Revenue’s head office.

Everett said due care and diligence was not exercised by the Revenue.

He found that Cuthbert’s actions ‘do not accord with the instructions in the Revenue handbook to adopt a neutral approach. The correspondence shows that the Revenue approach has been heavy-handed throughout.’

John Gwyer, Levy Gee’s tax investigation specialist handling the case, said: ‘The Revenue conducted the affair in a wholly inappropriate manner.

As a former Revenue senior inspector of taxes, I was embarrassed and ashamed by the behaviour of the department.

‘I can only commend the Scotts for their courage in continuing the battle against the Revenue, when the costs of doing so were substantial and recovery unprecedented.’